a
Case summary:V and M may face many financial challenges over next 20 years, to assess their financial situation their net worth has been determined which does not changed significantly over the years, their plan to take bank loan to pay off credit card debt does not have significant impact on their net worth and liquidity.
Characters in the case : V and M
Adequate Information:V and M both in their late 30s, with two children’s they are expecting to face many financial challenges over next 20 years, they have recognized the need to prepare for their retirement and the challenges aging, they are required to determine their net worth, they are thinking to pay off their credit card debts totaling $1,600, what effects would these changes have on their net worth. It is also required to determine, if V and M sell their New York 2038 bonds, and what effect should it have on their net worth and liquidity ratio.
To determine: The effect of appraisement of home to $200,000 and decrease in value of automobile by $8,500 on the net worth and on their asset to total debt ratio.
Introduction:
Financial statements: It shows value of assets and liabilities of an individual or family as well as their income and expenditure. The two most useful statements are balance sheet and the cash-flow statement.
Financial ratios are mathematical calculations intended to simplify the process of assessing your financials and the progress of your financial conditions using financial statements, ratios act as tools to develop saving, spending, and credit use patterns according to your objectives.
b
Case summary:V and M may face many financial challenges over next 20 years, to assess their financial situation their net worth has been determined which does not changed significantly over the years, their plan to take bank loan to pay off credit card debt does not have significant impact on their net worth and liquidity.
Characters in the case : V and M
Adequate Information: V and M both in their late 30s, with two children’s they are expecting to face many financial challenges over next 20 years, they have recognized the need to prepare for their retirement and the challenges aging, they are required to determine their net worth, they are thinking to pay off their credit card debts totaling $1,600, what effects would these changes have on their net worth. It is also required to determine, if V and M sell their New York 2038 bonds, and what effect should it have on their net worth and liquidity ratio.
To determine: the effect of bank loan for $1,600 to pay off credit card debts worth $1,600 on net worth.
Introduction:
Financial statements: It shows value of assets and liabilities of an individual or family as well as their income and expenditure. The two most useful statements are balance sheet and the cash-flow statement.
Financial ratios are mathematical calculations intended to simplify the process of assessing your financials and the progress of your financial conditions using financial statements, ratios act as tools to develop saving, spending, and credit use patterns according to your objectives.
c
Case summary:V and M may face many financial challenges over next 20 years, to assess their financial situation their net worth has been determined which does not changed significantly over the years, their plan to take bank loan to pay off credit card debt does not have significant impact on their net worth and liquidity.
Characters in the case : V and M
Adequate Information: V and M both in their late 30s, with two children’s they are expecting to face many financial challenges over next 20 years, they have recognized the need to prepare for their retirement and the challenges aging, they are required to determine their net worth, they are thinking to pay off their credit card debts totaling $1,600, what effects would these changes have on their net worth. It is also required to determine, if V and M sell their New York 2038 bonds, and what effect should it have on their net worth and liquidity ratio.
To determine: the effect of selling of New York 2038 bond and transferring cash to savings account on net worth and liquidity ratio.
Introduction:
Financial statements: It shows value of assets and liabilities of an individual or family as well as their income and expenditure. The two most useful statements are balance sheet and the cash-flow statement.
Financial ratios are mathematical calculations intended to simplify the process of assessing your financials and the progress of your financial conditions using financial statements, ratios act as tools to develop saving, spending, and credit use patterns according to your objectives.
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Chapter 3 Solutions
Personal Finance (MindTap Course List)
- Jane and Robert Brown are married and have eight children, all of whom are eligible to be claimed as the couples dependents. Robert earns 196,000 working as senior manager in a public accounting firm, and Jane earns 78,000 as a second-grade teacher. Given their large family, they live in a frugal manner. The Browns maintain a large garden and some fruit trees from which they get most of their produce, and the children take family and consumer science classes so that they can help make the familys clothing. The Browns record no gross income other than their salaries (all of their investment income is earned from qualified retirement savings), and their itemized deductions are less than the standard deduction. In addition, they incur no additional adjustments or preferences for AMT purposes. a. What is the couples 2019 regular tax liability? b. What is the couples 2019 AMT? c. Express the calculation of the couples AMT for 2019 as a Microsoft Excel formula. Place any parameter that could change annually in a separate cell, and incorporate the cell references into the formula.arrow_forwardJeff and Rhonda are married and have two children, Max and Jen. Max is 20, attends college in the Los Angeles area hill-time, and works as a stunt double for a television show while he is in school. Max earns 15,000 per year as a stunt double and lives at home when school is not in session. Jeff and Rhonda pay for Maxs tuition and all of his living expenses. Jen, who lives at home, is 18 years old and makes 18,000 per year working full-time as an office administrator. Jeff and Rhonda pay for 65 percent of Jens living expenses. In addition, Rhondas mother, Joanne (a widow), resides with the family, earns 3,000 per year in interest and dividends from her investments, and receives 9,000 per year in Social Security benefits. Jeff and Rhonda receive no rent from Joanne and provide all the support she needs for the year. Everyone mentioned is a U.S. citizen. How many people qualify as dependents for Jeff and Rhondas income tax return? a. Two b. Three c. Four d. Fivearrow_forwardJohn Benson, age 40, is single. His Social Security number is 111-11-1111, and he resides at 150 Highway 51, Tangipahoa, LA 70465. John has a 5-year-old child, Kendra, who lives with her mother, Katy. As a result of his divorce in 2016, John pays alimony of 6,000 per year to Katy and child support of 12,000. The 12,000 of child support covers 65% of Katys costs of rearing Kendra. Kendras Social Security number is 123-45-6789, and Katys is 123-45-6788. Johns mother, Sally, lived with him until her death in early September 2019. He incurred and paid medical expenses for her of 15,588 and other support payments of 11,000. Sallys only sources of income were 5,500 of interest income on certificates of deposit and 5,600 of Social Security benefits, which she spent on her medical expenses and on maintenance of Johns household. Sallys Social Security number was 123-45-6787. John is employed by the Highway Department of the State of Louisiana in an executive position. His salary is 95,000. The appropriate amounts of Social Security tax and Medicare tax were withheld. In addition, 9,500 was withheld for Federal income taxes and 4,000 was withheld for state income taxes. In addition to his salary, Johns employer provides him with the following fringe benefits. Group term life insurance with a maturity value of 95,000; the cost of the premiums for the employer was 295. Group health insurance plan; Johns employer paid premiums of 5,800 for his coverage. The plan paid 2,600 for Johns medical expenses during the year. Upon the death of his aunt Josie in December 2018, John, her only recognized heir, inherited the following assets. Three months prior to her death, Josie gave John a mountain cabin. Her adjusted basis for the mountain cabin was 120,000, and the fair market value was 195,000. No gift taxes were paid. During the year, John reported the following transactions. On February 1, 2019, he sold for 45,000 Microsoft stock that he inherited from his father four years ago. His fathers adjusted basis was 49,000, and the fair market value at the date of the fathers death was 41,000. The car John inherited from Josie was destroyed in a wreck on October 1, 2019. He had loaned the car to Katy to use for a two-week period while the engine in her car was being replaced. Fortunately, neither Katy nor Kendra was injured. John received insurance proceeds of 16,000, the fair market value of the car on October 1, 2019. On December 28, 2019, John sold the 300 acres of land to his brother, James, for its fair market value of 160,000. James planned on using the land for his dairy farm. Other sources of income for John are: Potential itemized deductions for John, in addition to items already mentioned, are: Part 1Tax Computation Compute Johns net tax payable or refund due for 2019. Part 2Tax Planning Assume that rather than selling the land to James, John is considering leasing it to him for 12,000 annually with the lease beginning on October 1, 2019. James would prepay the lease payments through December 31, 2019. Thereafter, he would make monthly lease payments at the beginning of each month. What effect would this have on Johns 2019 tax liability? What potential problem might John encounter? Write a letter to John in which you advise him of the tax consequences of leasing versus selling. Also prepare a memo addressing these issues for the tax files.arrow_forward
Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT
Pfin (with Mindtap, 1 Term Printed Access Card) (...FinanceISBN:9780357033609Author:Randall Billingsley, Lawrence J. Gitman, Michael D. JoehnkPublisher:Cengage Learning